Getting Better at Setting Marketing Goals

Aligning Goal Setting, Accurate Forecasting, and Smart Budgeting

How can marketers keep getting better at setting goals?

It's a topic that's both timeless and ever-evolving.

The key lies is in breaking free from conventional methods and rediscovering the core of strategic planning.

Let's look at how marketers regardless of their position in the company get a better idea, can create a powerful framework for sustainable growth and efficiency in your marketing strategy.

Think about your annual plans. They're more than just figures and forecasts. It's an art and science. You need to weave a story with your numbers.

Ask yourself: Are you part of the vital revenue discussions, or are you catching up after the decisions are made?

Here's the thing: Earning a seat at the revenue table means showing exactly how marketing fuels the pipeline and drives revenue.

Remember, it’s not just about getting a nod. It's about leading the conversation. This is where your impact lies.

We're not just rehashing what you already know; we're shining a light on the game-changing aspects of strategic planning that often get lost in the chaos of the corporate world.

Let's get back to the basics that tend to blur when you're deep in those daunting spreadsheets and intense goal-setting sessions.

Let's dive in together. From the rudimentaries of budgeting, to drilling down the nuances of micro-level conversions.

Yes, it's a long read, but stick with me. It's not about ticking off every goal-setting box. It's about mastering the core principles.

This is for marketers, both seasoned and emerging, to build a robust narrative and a clear trajectory

It's about understanding the fundamental principles that you and I, as marketers, need to create a compelling story and a clear path forward.

We're not just crunching numbers; we're crafting a narrative that truly reflects your value and purpose within the company.

It's about making a meaningful impact. Ready?

10% Rule

Before we dive into the formulating LTV:CAC ratios or decoding the complexities of Growth Models, it's important to establish a strong foundation.

A key question for any business is: How much of your revenue should be allocated to marketing?

Established companies typically earmark around 10% of their annual revenue for marketing. This number jumps to nearly 15% for startups or businesses pre-product/market fit. But it's not just about how much you spend; it's about how you spend it.

This leads us to the concept of the Strategic Spending Ratio, a guideline for optimally distributing your marketing budget.

60:30:10

From that 10% slice of your revenue pie, how should you split it?

The ratio is straightforward: Marketing Spend : Talent : Tools = 60 : 30 : 10.

This means:

• Spend 50-60% on marketing activities.

• Allocate 30-40% to hiring and developing your marketing team.

• Use about 10% for tools and technology that support your marketing.

Here’s why:

1. Talent: Talent is more than a line item on your budget – it's the heart of your marketing magic. Pouring all your funds into ads is shortsighted. Talent is what moves the needle. You need people who can look at an ad budget and see possibilities, not just expenditures.

They're the ones turning every ad dollar into a strategic move, thinking five steps ahead, and laying down the tracks for scalable growth.

Investing in talent is investing in the future of your company.

Investing in talent means giving them not just a place in your company but also the resources to make a real impact. If you're just throwing money at ads and not investing in the brains to use that money wisely, you're playing a losing game. Smart marketing isn't about who can shout the loudest; it's about who can think the smartest. Invest in talent that can take your ad spend and multiply its impact. That's how you win in the long run.

It's about shifting from a "coin-operated" mindset to building a team that can take your marketing to the next level.

2. Marketing Spend: Your marketing spend isn’t just a number; it’s a statement of trust and investment in your team.

Talent needs resources to drive your company’s growth.

By allocating a significant portion of your budget to your team, you empower them to break new ground, innovate, and broaden your business's reach. It enables them to accelerate your marketing strategies far beyond mere maintenance.

Remember, the effectiveness of even the most talented team is limited if they lack the necessary budget. Without adequate budget, even the most talented team can only do so much.

Ultimately. its about ensuring that your skilled team has the financial muscle to to transform ambitious strategies into tangible achievements, making each investment as impactful as possible.

3. Tools: Investing in tools is not an expense; it's a force multiplier.

Tools empower your team to work efficiently, avoiding the trap of manual, repetitive tasks that eat into your most valuable resource – time.

Now, let's say you've got a great team and you're spending smart.

But are you giving them the tools they need? Think about it.

Allocating about 10% of your budget to tools isn't just spending money; it's about supercharging your team's efficiency.

Without the right tools, they're stuck doing everything manually It's slow, tedious.

Investing in the right tools means your team can focus on what they do best - being creative and strategic, rather than getting bogged down in the mundane.

When you don't automate, and delegate. You are wasting someone else's time. If it can be automated using tech/tools you might as well invest in that, and have the person spend their time on a task that leverages their cognitive capacity.

If you may ask me does this 60:30:10. rule apply even when a company scales. As your company grows, this ratio evolves. Whether you're managing millions in ad budgets with a lean team or adapting to a product-led or sales-led approach, the principles remain the same.

For large-scale enterprises or businesses with significant ad budgets, the ratio needs to be fine-tuned. It depends on your business model - product-led or sales-led. For businesses that are based on sales-led-growth, for instance, the headcount may need to increase in sales more than marketing. However, for most SMBs, startups, and enterprises that fall within the 80% of the marketing bell curve, this golden ratio of marketing spend, talent, and tools remains a solid foundation for strategic planning and investment.

Now with the groundwork laid on strategic spending, let’s dive  into the actual topic - marketing budget planning. About the core of your demand generation expenditures: paid media, and content.

We'll steer clear of the murky waters of strategic spends like podcasts, sponsorships, and influencer marketing. Their value is undeniable, but their impact is often less tangible and harder to measure. This guide focuses on the more quantifiable aspects of your marketing budget, ensuring you get real, actionable insights.

We are not going to be building one of these ugly looking dashboards:

Instead, we're stripping down to the essentials - a clear, no-nonsense approach to goal setting and budget planning, especially tailored for smaller companies and teams at the early stages of growth. We're zoning in on predictable revenue channels for maximum impact.

What numbers to look at?

Identifying Key Metrics: Aligning Spend with Growth

When deciding where your marketing dollars go, start by asking two simple questions:

1. How much are you spending?

2. What value are you getting back?

Understanding your growth potential begins with evaluating your current marketing investments and the returns they generate. This introspection sets the stage for defining your company's objectives.

Shifting your focus from the current to the future.

What are your company's big-picture goals?

This is crucial because your company's aims directly inform your growth strategies.

Are you looking to increase business, revenue, and clients?

Or is your focus on improving efficiency, speed, and delivering value? (before we dive deeper, let’s bookmark the discussion on efficiency and speed for a bit later)

For teams in sales and marketing, this often translates to a clear goal: generating 'Net New Revenue from New Businesses.'

This approach breaks down your broad objectives into specific, actionable targets, tailored to your business type and growth stage.

But let's not get ahead of ourselves – first, we need to lay down some basic principles. So, let's start with a few illustrative numbers to make sense of how all this adds up.

Imagine we're looking at a company's growth over the years. We've got our Net Revenue, Net New Business Revenue, and the number of New Customers or Opportunities Won. Let's illustrate with a sample data in the table below.

[caption id="attachment_1230" align="alignnone" width="1378"]

Table 1[/caption]

Take a look:

• Net Revenue grew by 20%.

• Net New Business Revenue jumped by 25%.

• New Customers increased by 20%.

With this figure as our starting point, let's use this to explore how we can get better at setting realistic goals for the year and plan marketing budgets accordingly.

Let's set the baseline by zeroing in on Net New Business Revenue as our key metric.

From a marketing perspective, it's about translating this revenue and customer growth into measurable outcomes.

Essentially, marketing must backtrack these figures to the various stages of the customer lifecycle, from attracting subscribers to nurturing leads, converting them into Marketing Qualified Leads (MQLs), and eventually Sales Qualified Leads (SQLs).

This process ensures every marketing action aligns with our overarching revenue and customer acquisition targets. Now with our north start metric as our net new revenue, let's draw a table with figures that resonate with marketing.

[caption id="attachment_1231" align="alignnone" width="612"]

Table 2[/caption]

In the above table, I've applied what I believe are realistic conversion ratios at each stage of the customer journey. Visualising them below by lifecycle stages.

These ratios are quite standard in the industry, but there's more to delve into on this topic, which we'll explore later in the blog.

This breakdown lays the groundwork for our detailed goal-setting process. Allowing us to use past data to fill in the gaps and make informed predictions for the future.

Now, let's shift gears to examine our marketing spend and activities before we deep dive into goal setting.

We've already got a grip on the 'value/revenue' aspect; the next big question is, 'What's the cost to achieve these results?'

Let's dissect our marketing expenditures to see how they translate into tangible results.

Understanding the cost associated will help us craft a budget that’s not just a series of numbers, but a strategic tool for growth. We'll delve into how every dollar spent correlates with tangible outcomes, ensuring every aspect of our marketing strategy is both cost-effective and impactful.

Here's a table with sample data that's relative to our former dataset.

[caption id="attachment_1234" align="alignnone" width="590"]

Table 3[/caption]

Now that we have answered both the questions:

1. How much are you spending? Table 3

2. What value are you getting back? Table 2

Let's get on track to answering our primary question of 'What our marketing goals look like?'

So, let's get started with looking at the fundamental cost metric - CPL.

Cost-Per-Lead = Marketing Spend (Ad Spend + Content Expense)/ Total Number of Leads

So, let’s consolidate our marketing spend from Table 3 into one row and  pull the leads data from our previous tables to calculate our CPL.

So, our CPL will be something like

[caption id="attachment_1236" align="alignnone" width="594"]

Table 4[/caption]

Now that we have our revenue, ad spend, and CPL sorted, we have a base framework to perform a rudiment projection of what our goals will look like.

For our sample data, we see a consistent CPL at $34.4 on average.

This means, if our revenue goal for the next year is speculated to increase by 30%, say from $300,000 to $400,000. What would our marketing budget be?

So, let's do another fundamental revenue metric - Average-Revenue-Per-Customer (ARPC)

ARPC = Total Revenue / Number of Customers = $300,000 / 30 = $10,000

Keeping our ARPC in tact, for the projected revenue goal of $400,000, we are looking at 40 new customers.

Keeping our marketing exactly where it is in the current year:

With a simple math we determine our conversion rate at 1%.

Lead-to-Customer Conversion Rate = Leads/Customer = 3000/30 = 1%

For our projected revenue, we are looking at 4000 leads at the CPL of $34.3.

Marketing Spend = Total of Leads Required x Average CPL = 4000 x $34.3 = $137,200

So, just purely from a CPL standpoint, keeping other variables intact, and trace down marketing spend from the revenue target. We would be estimating the Marketing budget to be $137,200.

This is the base scenario where most teams arrive at with their calculations. I call this Scenario I.

This is a good starting point. Because this let’s us arrive at a budget ceiling if all else remained the same. We can comfortably set a upper limit for our budget at $137,200, and we would reach our revenue target at the same rate.

Beyond base scenario

Target setting often overlooks the ‘how.’ A 30% growth last year doesn’t guarantee the same this year.

Dig deeper. Where's your next 10% coming from? Got a lever to pull, or need a new one?

This is key. We say our budget's max is $137,200, aiming for the same growth. That's just the start.

Now, the real deal: conversion rates. They're huge for goals. To set a real budget, we need to get granular. Understand every piece that drives growth.

Let's look at the conversion rate between each stages.

Given the base scenario, keeping our North start metric (revenue goal) intact, we would want to get 4000 leads.

That breakdown looks like this, and we already saw this in the table. But I want to lay it out visually so we have more room to look at the nuances.

Remember, we conclusively arrived at 1% conversion rate for Leads → Customer. But what if we can improve the conversion rates among Leads → MQL → SQL.

Even if we slightly improve the Lead to MQL conversion rate…

….instead of leaving out 50% of the leads that don’t convert into MQLs, what if we rather put these leads on a nurturing email workflow. And even if we were only able to convert 5% of them. We are looking at +175 net new MQLs. And this trickles down to contributing conversions along the pipeline keeping all else intact to increase in 2 new customers. When you increase 5% Lead to MQL Conversion, how do you magically get two additional customers.

Let’s see it visually below.

The 175 additional MQLs translate to an additional 37 SQLs (instead of 400) driving 9 new opportunities. Similarily, if we slightly improve the MQLs to SQLs conversion by 3%. That is from 32% to 35%. Let's see how it affects the funnel.

We see an addition of 81 more Sales-Qualified-Leads that your sales team can get a hold of. Keeping the rest of the conversion in tact, we are looking at +5 new customers. This is just by increasing conversion rates by 5% and 3% at different stages in the funnel.

Again, sounds magical.

But that's the compounding effect of conversion that get’s overlooked, and doesn’t even make it to the annual or quarterly OKRs meetings.

I could go on, and share a couple more scenarios where small improvements could lead to significant outcomes, like for example

• What if we accumulated the leads in the system. From previous years 5500 (2500+3000) along with the net new ones, and you performed a lead nurture campaign. Even if 5% of those leads convert to become MQLs, we are looking at 275 new MQLs right from the system, without acquiring new leads.

• Or, let’s say we increase opportunity → customer conversion rate by 1%. From 25% to 26%. Which gives us 1 new customer, which means we score an additional ARPC in revenue equaling $10,000 - which is pretty much covers the Ad Spend for one month.

These scenarios are to show that bringing conversion rate into goal settings is by far the most effective targets your teams can set, rather than stopping at the conventional forecasts that heavily rely on CPL, and Lead Volume.

Setting Conversion Goals

Conversion rates, without a doubt are the key to doing more with less. Starting with refining the buyer persona, closing in on the ICP, all the way to the nitty-gritty details of landing page optimisation gets into account of a good Marketing budget planning session.

But for the scope of this article of defining the high level budget, let’s not get ahead of ourselves, and take it step by step.

In optimising for conversions, the more important aspect to notice is that, the more improvements you can make to the conversions that are closer stages are towards sales, the more significant the impact is.

In the examples above, 5% increase in Leads → MQL increased the net new customers by 2. Whereas the 3% increment to the MQL → SQL conversion rate increased the net new customers to 5.

Hence its crucial to get the funnel tight and intact before you go and throw ad money into any marketing campaigns.

It’s always better to remove room for errors and inefficiencies deeper down the funnel than it is in the top-of-the-funnel.

This highlights the essential nature of synergy between sales and marketing teams. It's crucial for these teams to collaborate closely, working hand in hand. Daily sync, particularly concerning the quality of leads, and maintaining open, two-way communication are key to their combined success.

Without a robust closed-loop feedback system continuously assessing lead quality and fine-tuning the alignment between sales and marketing, there's a risk of a leaky funnel. This gap can lead to inefficient ad spend, eroding your marketing effectiveness and ROI.

Let’s get back to setting goals

That brings us to the next and most important segment of nailing the budgets, and goal setting.

Which is goal setting for improving conversion rates along with just the fundamentals. We still need to keep a ad budget ceiling as high as the originally calculated $137,200.

So, let’s put together our table with some base numbers.

For a budget of $137,200, and a projected CPL goal of $30. We are looking at 4573 leads.

With everything same as is. The exact same Average Revenue Per Customer, the exact same budget $137,200.

If we focused just on improving the conversions where,

• We reduce CPL by $4.3 down to $30

• Improve conversions by 10%, 8%, 5%, and 5% among each lifecycle stages outlined in the table above.

We see a compounding effect, drastically increasing the customers to 98 from 40. Exact same ad spend, and exact same revenue per customer as the previous model.

Now, for this model projected revenue is at $980,000. It’s nuts.

This is hard.

But leading startups get these right all the time.

And that’s where tools and talent come into the picture of setting goals.

Let's talk about the nuances. These are what set apart companies that either get acquired or shut down, from those that leap to the next growth stage.

Hitting that $980,000 is a staggering 245% increase. That's not one big win, it's a combination of many smaller wins at each stage.

Here’s the catch: You can’t just outsource this. Sure, external talents or vendors can optimize, but then you lose value in their margins. You end up paying for these optimizations through service fees. Worse, you might get locked into a contract where optimization halts the moment payments stop.

Remember our Marketing Spend : Talent : Tools principle? It highlights the power of in-house talent, grown within your startup. That's why growth leads are not just at the revenue table, but often from the get-go, parallel to founding. Distribution is as vital as product development.

But let’s stay focused.

We must acknowledge that optimising that such baseline uplift is tough. Achieving those conversions is a real challenge. That's where your marketing efforts need to be laser-focused: drawing a straight line of relevance through each stage, finding the smoothest path for your ideal customers.

For the above calculation, the core metric we are looking to solve is the lead-to-customer conversion rate. Look at this example: improving this metric took revenue from $400,000 to $980,000 – a staggering 245% increase.

We are looking at 1% to 2.14% improvement in conversion. Sounds tiny, but it's huge. It involves:

• Nailing our target persona and getting the messaging just right

• Crafting exceptional ad visuals

• Connecting with customers at every stage, resonating deeply

• Creating a seamless journey: from ads, to landing pages, to emails

• Streamlining your internals: lead scoring, lead handoff

• Equipping Sales with all the intel they need

• Perfecting your sales pitch to be both effective and meticulously organized

This level of optimization spans every lifecycle stage. That's why it's crucial to embed it in our annual budget and goal planning. Small percentages, big impact.

So when you set these types of ambitious goals that your team needs to be aiming at, naturally you’re going to have this goal trickle down to strategies, and the steps you want to take to achieve this level of conversions.

And that’s where SMART goals frameworks come into play. (Specific, Measurable, Attainable, Relevant, Time-bound). That let’s you figure out how to translate these quantified metrics down to activities that your team sets out to accomplish over the course of the planned year.

Let's tackle a big question: High Quality Conversions vs. Higher Costs.

Now before moving on, let’s pause for a moment and address a common dilemma: Higher Quality Conversions vs. Higher Costs

When we sharpen our focus on conversions, making our targeting more precise, it's natural to see CPMs and CPLs increase. We bid more on a narrower audience. If you're working on the DSP side, you might feel a tug-of-war: aiming for higher quality conversions but worrying about rising CPLs.

It is only natural for an programmatic buyer working on the DSP side to be conflicted when we say we want to get the quality of conversions to up while keeping the CPL down.

Increasing conversions while keeping CPL low seems contradictory. But zoom out. The bigger picture changes things.

But let's step back for a moment. When we look at the bigger picture, these conflicts start to dissolve. Perfecting your messaging isn't just a single-thread task; it has ripple effects. It touches everything from how your ads are received to the velocity of your sales. Your messaging is the heart of your narrative, influencing everything from your ad copy to the way your sales team approaches a meeting or crafts a cold email.

So, honing these qualitative aspects is more than crucial – it's transformative. It brings exponential benefits across every point of contact, making that 1% to 2.14% improvement not just possible, but realistic.

And here's the uplifting part: higher conversions often lead to lower CPLs, maximizing your ad spend.

Let's hold that thought. Now, we return to our broader principle: budget allocation.

Remember, setting marketing goals and budgets isn't just about figures. It's about understanding the nuances, the deeper layers. That's why we started this post by examining budget allocation principles:

1. Media

2. Talent

3. Tools

You need media spending to rapidly pursue new markets and invest where returns are highest.

Then there's talent. You need people who can operate with autonomy, who have the vision to see the big picture.

And tools. They're your decision-making powerhouses. From AI speeding up content creation to tools for forecasting, they're all about efficiency and insight.

In simple terms: optimize with media, scale with tools, grow with talent.

1. Media - will take care about the fundamentals.

2. Tools - will take care about what’s keeping your talent informed and efficient.

3. Talent - will take care about the conversion rates.

Diving deeper into conversion rates is always an option, but let's not get lost in the weeds. It's time to finalize our marketing budget and goals.

Before we dive into the chart, let's take a moment to explore a couple of other key factors. Think of it as breaking down our strategy into two simple questions: What needs to increase? And what should we reduce? On the increase side, we're focusing on Average Revenue Per Customer and Lifetime Value. These are crucial for long-term success. On the reduction side, our targets are Customer Acquisition Cost (CAC) and Cost Per Lead (CPL) – essential for efficiency and profitability.

But let's not forget the advanced metrics like the LTV:CAC Ratio, where our aim is a 3:1 ratio, and the Payback Period. These metrics tell a deeper story, one that we'll delve into another time, as they deserve a detailed focus of their own.

For now, I’ll leave you with this essential math and a chart. It's your toolkit for nailing your 2024 budget and goal setting, especially if you're still in the planning stages.

Marketing Goals

• Lead to Conversion >2%

• Total Number of lead > 4000

• Leads to MQL Conversion >60%

• Reduce CPL by 14%

To sum it all up, if there’s one thing I want you to take away, it's this: the importance of conversion rates across lifecycle stages in your marketing strategy and goal setting.

1. Importance of conversion rates across lifecycle: This is the heartbeat of your strategy. Understanding and optimizing these rates at each stage of the customer journey can transform your marketing efforts from ordinary to exceptional.

2. Keep the Talent : Tool : Media principle at heart: It's a triad that balances your approach. Leveraging the right talent, tools, and media strategies in harmony can exponentially increase the effectiveness of your marketing endeavors.

3. True growth lies in the nuances: The small, often overlooked elements of your strategy can be the difference between stagnation and significant growth. It's in these subtleties that you'll find the most potent opportunities for transformation and impact.

True growth lies in the nuances

Digging into the nuances is where the real growth happens.

Think like a founder.

Dive deep into your marketing funnel. That's where you find what I call 'transformational growth gems.' These valuable insights are embedded in the complex interactions between the subtle nuances and overarching tactics of your marketing strategies.

These are found in the intricate weaving of the micro and macro aspects of your marketing efforts. The more you explore and understand these aspects, the more effectively you can communicate these insights.

And here's the key: Turn those findings into stories. Make them clear, make them resonate. When you talk to your leadership, don't just throw data at them. Tell them a story that sticks. This cuts through the noise and drives growth – for the company, and for you in your role.

Tinker and identify growth levers to integrate into your annual goals, no matter how small or fragile they seem. The more you uncover, the better you become at leveraging them. Remember, traffic was the king metric a decade ago; now it’s all about revenue. The focus will shift back to traffic, but this time, it'll be about quality traffic. In marketing, the key is constant discovery and improvement.

I'll leave you with this thought: As the driver of your marketing strategy, it's up to you to identify the key factors for growth. It’s not always about sticking to the same playbook. It's about adaptation and innovation.

In the next blog post, we'll take these insights to the next level. Until then, remember: sustainable growth is the real growth. Don’t just chase targets. If you find yourself without clear growth levers, set more conservative goals and focus on developing those levers. It's about long-term success, not just immediate gains.